It must be borne in mind thoroughout this exercise that maximising income in the long term requires investment at an initial loss (often for one year or eighteen months), so the projections of possible future income from each source should run three to five years into the future.
Income from your donor-base
Essential steps in your strategy are to:
Working backwards from future needs – calculate future projections by estimating how many financial supporter (your donor-base) the organisation will have in each year of the projection. Donors can be called members, supporters, or friends, but their key characteristic is that they pay an annual fee or make a regular donation (usually it is sufficient that they have made one donation in the last two years), and are therefore liable to give again if asked, always providing you have looked after them and built a relationship that met their needs.
use the average number of donors to indicate future income from appeals, raffles, trading, etc., as the income from these activities is directly related to the number of donors you have (and their giving capacity). Multiply the average donation by the projected number giving in each case.
reflect on the impact of inflation on your projection, and any other economic indicatiors agreed with your organisation’s treasurer or finance officer.
In using the blank sheet of paper principle to determine where you wish to be in a few years time, it is necessary to:
estimate the number of supporters you will need in your finalyear. This tells you the bulk of your income for that year (add likely income from events, grants from trusts, shop income and other non-supporter income?.
work backwards from this estimate to calculate the investment needed each year to ‘buy’ those supporters. This will be based on the number of new members per thousand pounds invested in each recruuitment activity (prospecting) such as direct mail, advertising or leaflets.
take care not to assume that the market for new supporters is infinite. Amnesty International, for example, has had difficulty recruiting new members through advertisments placed outside the Guardian, Independent and Observer newspapers. Friends of the Earth has undergone a rapid period of growth and almost as rapid a period of decline, as the green movement’s media exposure rose and fell dramatically. However, the limits to growth are difficult to estimate, and it is easiest to look at other organsiations in your field and determine their level of support as a benchmark or target for your organisation. Support for the Medical Foundation for the Care of Victims of Torture has grown steadily over the last four years with the support base increasing by 25% a year but the lack of a similar organisation to benchmark against makes long-term planning a nightmare.
work out how much to invest in ‘buying’ each new donor. For this, you need two vital pieces of [email protected] the average ‘lifetime’ of a donor with you, and the amount they are likely to give over that lifetime. It is not as easy as it seems to calculate these numbers. The average lifetime of a donor will depend on the drop-out rate, i.e. how many donors cese to support you each year. In a membership organisation you may have this information to hand, but if your organisation is increasing or decreasing rapidly the calculation is still not straighforward.
The average amount a donor is likely to give depends on the total income from all donors (this figure will come from a consideration of all those sources of income that depend directly on the supporters such as raffles, trading, direct mail appeals and legacies), less the total amount you spend on them per person in terms of newsletters, administration, new members packs, etc., divided by the number of donors.
Income from other sources
If substantial amounts of your income are from other sources such as the government, trusts, shops or events, the future may be more difficult to gauge.
Government policy can change overnight and the State is in retreat from making provision for the voluntary sector in many Western countries. This process has, perhaps surprisingly, hardly been diminished even by ‘Third Way’ governments in the UK and elsewhere in Europe. In fact, the current boom in voluntary sector enterprise is largely the result of attempts to replace previous government provision for various social services by charitable activity. During this retreat there have been some legal changes that benefit non-governmental organisations (NGOs), albeit principally those that are registered charities, by improving the range of donations on which a charity can reclaim the tax already paid. Improvements in the law relating to Gift Aid, Covenants and Payroll Giving are examples of this. Pay careful attention to changes in the National Budget which may affect your organisation’s income. At the time of writing it looks as if Gift Aid will now be available on all donations if the donor registers in some way for this purpose. This could bring an unexpected dividend to charities or destroy the long term income enjoyed from convenats increasing the volatility in donations that has been a hallmark of the ninieties. If your organisation is recieving funds directly from government sources it will know quite accurately the immediate and medium-term prospects for additional income.
Trusts do not usually like to make any long-term commitments which tie up their disposable income for year sto come, and prefer to wean charitable organisations into becoming self-supporting. This is often a condition of any trust grant which lasts more than one year. Trust giving is rarely the mainstay of a large, long-lasting organisation. If this is the case with your organisation, it is partucularly vulnerable and should be investing in alternative forms of income generation. Small pressure groups with a few national supporters are often in this position, and can fold when their trust income dries up. It may be prudent to discuss this with your principal funders.
Shops can genrate an excellent income, but you must allow for peaks and troughs. A prudent fundraising strategy will also develop other effective means of raising income as a hedge against the days when shops do badly or there is some unforeseen shift along the product cycle and people will no longer enter ‘charity shops’. One such hedge could be the developmnet of e-commerce and fundraising on the internet.
If your gap analysis indicates you shoudl be investing in new areas of fundraising it will help to discuss these with an experienced fundraiser of consultant to estimate possible income.
Having selected your range of techniques and put these together in a strategy you will need to budget to cover this cost and estimate how much income it will generate over time. Next, plan who does what, this will be essential in turning your strategy into reality. Most of this work will have been done as you selected and marshalled your techniques. You will probable find this to be an iterative process in which you will need to make adjustments before you come up with an optimum stategy, which will then need to be agreed officially with your organisation before you have the green light to proceed. One practical result of this process is usually to set a new income and expenditure budget.